New York Markets After Hours

Lenovo net profit up on China sales

JuroOsawa

HONG KONG — Chinese personal-computer giant Lenovo Group saw its fiscal third-quarter net profit rise 30% from a year earlier thanks to strong sales of PCs and smartphones in China.

Lenovo’s solid quarterly results, which beat analysts’ expectations, come after the PC maker unveiled plans for two big acquisitions in the U.S.

In late January, Lenovo said it plans to buy Google Inc.’s
GOOG, -0.73%
Motorola Mobility handset business for $2.91 billion, just a week after it announced a deal to buy International Business Machines Corp.’s
IBM, -1.33%
low-end server business for $2.3 billion.

Analysts have warned that those deals may hurt Lenovo’s balance sheet over the next few years. Motorola’s net loss widened to $928 million last year from $616 million in 2012, according to Lenovo.

Lenovo
0992, +1.43%LNVGF, -0.68%
which last year overtook Hewlett-Packard Co.
HPQ, -1.30%
as the world’s biggest PC maker by shipment volume, said on Thursday net profit for the three months ended Dec. 31 rose 30% to $265.3 million from $204.9 million a year earlier, while revenue rose 15% to $10.79 billion from $9.36 billion.

Its earnings beat the $244 million average net-profit forecast of 15 analysts surveyed by Thomson Reuters. In the second quarter ended Sept. 30, Lenovo posted a 36% jump in net profit from a year earlier.

Lenovo’s revenue and profit are relatively solid among PC makers at a time when the industry is struggling to cope with weak demand for desktop and laptop PCs. Even so, analysts and investors are paying more attention to Lenovo’s road map for Motorola and IBM’s low-end server unit.

If both deals clear regulatory hurdles, Lenovo’s management capacities will likely be stretched over the next few years as it tries to integrate two big businesses in very different areas. In particular, investors are concerned that Motorola’s unprofitable business will weigh on Lenovo’s earnings.

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